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OFAC fines PayPal $7.7 million for 486 sanctions violations

PayPal will pay $7.7 million to settle charges by the U.S. Treasury Department's Office of Foreign Assets Control that it violated trade sanctions against Iran, Sudan, and Cuba.

EBay owns PayPal but plans to spin off the electronic payments firm sometime this year.

OFAC said PayPal violated various sanctions 486 times until 2013. The company failed to properly screen transactions with OFAC-sanctioned companies and persons.

Some of PayPal's violations, including payments it processed of about $7,000 for Kursud Zafer Cire, a Turkish national, violated the Weapons of Mass Destruction Proliferators Sanctions Regulations, OFAC said Wednesday.

PayPal told OFAC it didn't block Cire because its automated interdiction filter was not “working properly.”

OFAC said PayPal personnel failed to follow up six alerts triggered by transactions with Cire. A reviewer finally flagged the seventh transaction and asked for more customer background, including a copy of Cire's passport and date of birth. That resulted in PayPal blocking his account.

From late 2010 to September 2013, PayPal processed 98 transactions totaling about $19,000 that violated the Cuba trade sanctions.

During about the same time, PayPal processed 33 transactions for $3,300 that violated the Sudan sanctions.

From 2009 to 2013, it processed 125 transactions totaling about $8,000 in apparent violation of the Iran sanctions, OFAC said. And it processed 94 transactions worth about $6,000 that probably violated OFAC's global terrorism sanctions.

PayPal could have been fined just over $17 million for its violations of the proliferation and trade sanctions.

The proliferation offenses were "egregious," OFAC said. PayPal "demonstrated reckless disregard for U.S. economic sanctions requirements when its interdiction software failed to identify Cire as a potential match" for a sanctioned individual for about six months.

OFAC reduced the overall fine to $7.7 million because PayPal self reported the offenses and cooperated with the government. It hired new management in its compliance division, beefed up its OFAC screening processes, turned over all the evidence OFAC asked for, and agreed to toll the statute of limitations.

PayPal also had a clean record for the five years before the violations, OFAC said.

A copy of OFAC's Enforcement Information for March 25, 2015 is here (pdf).


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.